As interest rates fall,

Name: As interest rates fall,
Brand: Quizplus
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Question

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As interest rates fall, the return offered by existing bonds becomes relatively more attractive, leading to an increase in demand for those bonds and driving up their prices. This inverse relationship between interest rates and bond prices is known as bond price/yield relationship, and it applies to all types of bonds, including perpetuities. Therefore, the correct choice is (A) the values of bonds rise.

As Interest Rates Fall